Feb. 4, 2024
I am writing to oppose SR-OCC-2024-001. I feel that this rule creates a riskier environment for trading by alleviating the risk of margin in call in times of volatility. The proposal to reduce margin requirements during times of volatile market movement serve to unfairly mitigate the risk taken by those investing on margin. Those investments are inherently risky, and market volatility is a natural and expected behavior in the market. Reducing margin requirements in those scenarios would allow larger institutions to make even riskier bets, knowing that volatility would never create margin requirements that would require them to change their investments, or to take an unexpected loss. This proposed change is inherently unfair in creating a free and fair market. Volatile market movement can and will happen, and investors with margin requirements that increase significantly as a result should be aware and prepared for such eventualities. This proposal seeks to utilize the SEC to institute rules that favor larger investors such as banks and hedge funds to take even more risky derivative bets without fear that volatility will be a risk to them. If a margin requirement would become so large that it would cause a liquidation or bankruptcy, the proper risk assessment would be to not make that bet, rather than to change SEC rules to favor this risky bet. Margin requirements have been waved by clearing houses in the past (see January 2021), which already seems in contradiction to having margin requirements in the first place. Further eroding these requirements will only serve to create scenarios with even larger margin requirements in times of market volatility. A defaulting member of the OCC would cause other members of the OCC to shoulder the cost of failed margin calls. it is my understanding that having multiple members of the OCC is to mitigate the risk and market impact of multiple defaults, bankruptcies and liquidations. If this is the case and these margin calls represent a material risk to the OCC and all of its members, less risky investments of OCC members would be a more positive course of action rather than reducing the need for OCC to collect appropriate margin requirements from its members. OCC members are not guaranteed returns on their derivative bets, and proposing rules to favor risky bets feels counterproductive to "free and fair" markets. I strongly recommend a reconsideration of adopting this rule. Thank you, Ryan Brady-Toomey